Can a Retail Store Choose Between Subchapter V and Traditional Chapter 11 Bankruptcy?
Is your retail store in South Florida currently having trouble meeting monthly debt obligations or repaying creditors? If so, you might be considering bankruptcy as an option. Any business that wants to continue operating during and after a bankruptcy case should be planning to file for a type of reorganization bankruptcy since a liquidation bankruptcy (under Chapter 7) will result in the business needing to close its doors permanently and liquidate all of its assets. The types of reorganization bankruptcy that retail stores typically file include either Chapter 11 or Subchapter V (a subtype of a traditional Chapter 11 case). You might be wondering if your retail store can choose between the two, or if you will be bound to a particular type of reorganization bankruptcy based on the structure of your business and the business’s financial circumstances.
The experienced West Palm Beach bankruptcy lawyers at our firm can explain the differences between Subchapter V and a traditional Chapter 11 case, and we can explain how, in limited circumstances, a retail store could potentially file for Chapter 13 bankruptcy.
Generally: File for Subchapter V If Your Retail Store is Eligible
Unless you can file for Chapter 13 bankruptcy (which we will explain below, and this is not so common), you should plan to file for Subchapter V bankruptcy as opposed to a traditional Chapter 11 filing if you are eligible.
Subchapter V was designed to make it easier and less expensive for smaller businesses to file for reorganization bankruptcy. Chapter 11 tends to be extremely complex, and it is both more time-consuming and expensive than the newly created Subchapter V option. As the US Courts website explains, “Subchapter V cases are treated differently than a traditional Chapter 11 case primarily due to accelerated deadlines and the speed with which the plan is confirmed.” As such, if your retail store is eligible, you will want to consider Subchapter V before a traditional Chapter 11 filing.
Eligibility for Subchapter V
In order for your retail store to be eligible for Subchapter V, it must meet all of the following requirements outlined by the US Courts website:
- Debtor (the store) must be engaged in commercial or business activities (other than primarily owning or operating a single piece of real property);
- With combined total secured and unsecured debts of $7,500,000 or less; and
- Not less than 50 percent of [those debts] which arose from the commercial or business activities of the debtor.
If your retail store has too much debt, it will likely need to file for a traditional Chapter 11 bankruptcy. However, as we mentioned above, there is a possibility your store could be eligible for a Chapter 13 filing based on the structure of your business. If your retail store is a sole proprietorship — which means there is no legal distinction between your personal debts and the retail store’s business debts — then you can file for Chapter 13 bankruptcy. However, it is essential to know that any bankruptcy filed by a sole proprietorship will need to include the sole business owner’s finances, as well, since the entities are not separate and distinct from one another.
Contact Our West Palm Beach Bankruptcy Attorneys Today
If you have any questions about bankruptcy for your retail store, an experienced West Palm Beach bankruptcy lawyer at Kelley, Fulton, Kaplan & Eller can assist you. Contact us today to find out more about your options for reorganizing your debts.